UK Autumn Budget 2026
On 28 October the UK Chancellor of the Exchequer, John Healey MP, delivered his 2026 budget setting out the UK government’s plans for the economy, including taxation and spending.
The headline announcement for landlords is that the UK government is further increasing the rates of income tax applied to property income by 2%, adding to the 2% rise announced by Rachel Reeves last year. This will apply to landlords who reside in England, Wales and Northern Ireland and will take effect from 6 April 2027.
With power to set income tax rates and bands (including on property income) in Scotland devolved to Holyrood, the changes to income tax announced in the UK budget will not apply to landlords residing in Scotland. Any changes to income tax rates and bands in Scotland will be announced in the Scottish budget which is scheduled for 3 December 2026. It is possible that the Scottish Government will replicate the increase in income tax rates on property income, but we will have to wait until 3 December to hear if this is the case.
The Scottish Government has recently been given devolved powers to set separate rates of income tax for property income, and SAL has already been invited to a meeting with the government to discuss these new devolved powers.
SAL believes that any increases in property tax will impact negatively on tenants as they will lead to inflationary pressure on rents and a reduction in supply and investment in the sector. This is recognised by the Office for Budget Responsibility’s Economic and Fiscal Outlook which states: “These measures…represent a material reduction in returns to private landlords. This follows various measures over the past 10 years that have also reduced private landlord returns. These measures collectively risk leading to a steady rise in rents through two effects. First, potential landlords are less likely to enter the market, reducing long-run rental supply, which risks a steady long-term rise in rents if demand outstrips supply – which we think is more likely than not. Second, landlords are likely to pass on more of these costs to renters in the long-run through a combination of some current landlords leaving, thereby giving more price setting power to remaining landlords, and greater long-run flexibility to raise rents.”
SAL chief executive, John Blackwood, commented: “Introducing a property income tax in Scotland could be the final straw for many private landlords. The increased level of financial strain makes operating margins increasingly fragile for those investing in the private rented sector. With around 90 percent of landlords in Scotland owning just one or two properties, this might mean that being a landlord is no longer financially viable. If landlords choose to sell up, it will put the supply of much needed rented housing in jeopardy.
“This, combined with recent policy shifts, including impending rent controls introduced in the Housing (Scotland) Act, will put further pressure on landlords. The Scottish Government now needs to consider whether to follow suit and introduce similar tax changes in Scotland. However, such a move will prove equally unpopular with already nervous investors and no doubt further exacerbate Scotland’s housing emergency.
“Now, more than ever, the Scottish Government needs to work with landlords to keep them in the sector, rather than frightening them off with punitive tax hikes.”
The SAL helpline doesn’t cover tax advice. If you require advice on how the budget announcements might impact you, then you should contact a tax adviser or an accountant such as EQ Accountants.
